Friday, October 22, 2010

In a move that is likely to leave creditors high and dry, Awal Bank BSC, a Bahrain-based subsidiary of Saudi Arabia’s embattled Saad group, has filed for Chapter 11 bankruptcy in a New York bankruptcy court. The filing comes little more than a year after the bank sought US court protection from US creditors and is in line with recommendations made in a report by Ernst & Young.

According to its court filing, Awal Bank has assets valued at most at $100 million and liabilities of more than $1 billion. Bahrain’s central bank last summer appointed an administrator for Awal Bank, owned by Saudi billionaire Maan al-Sanea, after it had defaulted on loans in a sequence of defaults that has sparked a bitter legal battle across continents between Al Sanea’s Saad Group and Saudi conglomerate Ahmad Hamad Al-Gosaibi & Brothers Co. Under Bahrain law, the Bahrain central Bank-appointed administrator has until the summer of next year to decide whether to liquidate Awal bank or return it to its owners.

Assuming that the bankruptcy filing was made with the consent of the Bahrain Central Bank, the filing suggests that Bahrain has decided that Awal Bank is beyond salvation and should be liquidated. In its filing, Awal Bank asserts that after payment of the administrators and other immediate expenses, it will not be able to compensate its unsecured creditors, who number somewhere between 60 and 100 and include: Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, AlGosaibi Money Exchange, Bank of Montreal, Bayerische Hypo-und Vereinsbank, Bayerische Landesbank, Boubyan Bank, Calyon Corporate and Investment Bank, Commercial Bank of Kuwait, Commercial Bank of Qatar, Commerzbank, Commonwealth Bank of Australia, Fortis Bank, Gulf International Bank, HSBC, HSH Nordbank AG, JP Morgan, Kuwait Finance House and The International Banking Corporation.